New Jersey’s appellate court has ruled that liability under the Conscientious Employee Protection Act (CEPA) is not limited to employers - now employees may be held liable in their individual capacity. The court’s decision in Zelkina v. Orlioukova settles what was previously an unresolved issue of law. Before Zelkina, it was unclear whether a court would impose liability directly upon an individual under the statute. It is now beyond dispute that both an employer and its employees may be held liable for CEPA violations. This decision raises significant concerns for employers and employees alike.

Lidia Zelkina worked as a controller for Confident Care Corporation (CCC) pursuant to a consulting agreement. Zelkina “blew the whistle” after allegedly discovering that a CCC employee, Elena Orlioukova, was defrauding the employer’s insurance carrier. Zelkina claims she was fired for refusing to participate in the fraud. She then filed a complaint against Orlioukova for violation of CEPA. The trial court dismissed the complaint on the theory that Zelkina was an independent contractor; not an employee. The Appellate Division reversed the trial court decision because it did not properly consider whether Zelkina was an “employee” entitled to protection under CEPA. In so doing, the Appellate Division took a significant leap by also concluding that Orlioukova could be held “individually liable.”

CEPA prohibits employers from retaliating against employees who have opposed or reported employer activities that the employee reasonably believes are illegal or in violation of public policy. Successful plaintiffs may be awarded compensatory damages (such as lost wages), punitive damages and attorneys’ fees. Now, not only must employers be aware of the potential pitfalls of violating CEPA, but individuals, such as co-workers, supervisors and managers, must be wary of personal exposure as well.

As most employers operating in New Jersey already know, CEPA is recognized as one of the most protective whistleblower statutes in the country. The extension of individual liability to CEPA claims is yet another broadening of the protection conferred under the statute. This most recent expansion raises obvious concerns for employees - especially employees with supervisory responsibilities because those persons face the greatest risk of exposure to personal liability. Not long ago, only employees who suffered a “tangible adverse employment action” - such as termination, suspension or demotion - could sustain a retaliation claim. The law was broadened recently to allow claims even where employees suffer more trivial reprisals, such as negative job evaluations or assignments, if those actions are intended to have a “chilling effect” on an employee’s whistle-blowing. Accordingly, it is conceivable that a supervisor could face individual liability resulting from an unfavorable job assignment or negative evaluation given to a whistle-blowing subordinate.

For more information about this topic, contact Frank Cook at 609.896.4587 or [email protected] , Luke Wright at 609.895.6738 or [email protected] , or any member of Fox Rothschild’s Labor & Employment Department.